‘Fiscal cliff’ impasse has farm policy on knife’s edge

• Forecasts of a happy resolution for a new farm bill have significantly dimmed.
• Farm bills always include a provision suspending the implementation of “permanent law.”
• Without that provision, complex and antiquated, 60-year-old policies – including those that could eventually double the current $3.60-plus price of a gallon of milk -- would come back into force.

Farm bills always include a provision suspending the implementation of “permanent law.”

Without that provision, complex and antiquated, 60-year-old policies — including those that could eventually double the current $3.60-plus price of a gallon of milk — would come back into force.

Now, just days away from year’s end and with a new farm bill — or even an extension of the 2008 farm bill — tied up in the “fiscal cliff” budget debates in Washington, D.C., the inability of the major legislative players to strike a deal looms large.

And the forecasts of a happy resolution have significantly dimmed following the Dec. 20 refusal of a 30- to 40-member Republican House contingent to get behind Speaker John Boehner’s proposal to only increase taxes on incomes over $1 million.

At that point, realizing the futility of trying to further whip the votes for his plan, Boehner reportedly cited the Serenity prayer and sent the Republican caucus home for Christmas.

So, with Congress expected to be back in session on Dec. 27, where does farm law now stand?

“I think (Obama) has clearly moved his original ask from raising taxes on Americans who make $250,000, or more, up to $400,000 a year,” says Chandler Goule, National Farmers Union vice-president of Government Relations. “Speaker Boehner reacted with his plan and there simply wasn’t enough support within his own party.”

Goule believes there will be no “fiscal cliff” bill. “That won’t be because the (Obama) administration hasn’t been doing its job trying to negotiate. It’ll be because there are now two Republican parties. We’re now in a quasi three party system and the country doesn’t know how to function.

“When the Republican leadership can’t even move its own agenda when it comes to revenue assurance for the country, for fiscal stability, it’s very concerning. … The House remains dysfunctional.”

One thing that’s obvious, he says: We’re not going to get a farm bill this year “without some type of fiscal cliff bill to attach the agriculture legislation to.”

Fred Clark has grown wary of reading the tea leaves. “Who knows where things will go?” says the legislative lawyer with Cornerstone Government Affairs. “It’s difficult to guess. I don’t think anyone in Washington knows what’s going to happen with anything.

Will lightning strike?

“I don’t see a path forward to do a new farm bill before Jan. 3 when the new Congress convenes. One would like to think lightening will strike and there will at least be an extension (of the 2008 farm bill). The (agriculture) committee leadership in the House and Senate has been working very hard to come to an understanding.

“But, right now, I think you’d be hard-pressed to find anyone in Washington who’ll tell you there is a plan (going forward) or what that plan is. That’s true for either the farm bill or the other issues.”

If a similar impasse had existed a decade ago, Clark would have had, “all the confidence that Congress would find a way to get at least an extension done. When I worked on the Hill 20 years ago and there was a problem the vast majority of the members of Congress felt an innate responsibility to address that problem. Even if they disagreed with some of the final legislation they would, at some point, accept reality and vote no — but let the process go forward.”

In contrast, “now there are a number of lawmakers in the House and Senate whose first inclination is often, ‘let’s do nothing.’ That completely changes the calculus. … It’s very difficult to handicap the chances of finding (a fiscal cliff agreement). Again, 10 years ago, cooler heads would’ve prevailed. Not now.”

Following Boehner’s inability to garner enough Republican votes for his fiscal cliff plan, Clark believes Democrats might back off dismissals of the Speaker’s late-summer claims that he didn’t have enough votes to pass a new farm bill.

“Speaker Boehner was quoted that the reason for no farm bill being on the schedule was because he didn’t have the votes. At the time, some people didn’t think that was true, that it could be worked out. But fast-forward to what happened (Dec. 20) and it turns out Boehner may have been right.”

With about a week left in the lame duck session, National Farmers Union board members have let Congress know it opposes an extension of the 2008 farm bill for multiple reasons.

“It will be more difficult to negotiate an extension than it would be to negotiate one of the five-year farm bills — either the one passed out of the Senate or the one passed by the House Agriculture Committee,” says Goule.

“We also don’t want to relieve the pressure supplied by the threat of enactment of permanent law. That can’t be taken away. It’s pushed Congress for decades to provide a farm bill, to provide credit, certainty, a farm safety net and to keep food costs low for consumers.

“If that pressure is taken away, and we extend the current farm bill — which will take $10 billion, or more, out of the baseline — we’ll lose 37 programs and get an even lower (Congressional Budget Office) baseline in March of 2013. It will be so hard to write a farm bill (in 2013). I don’t know if there will be enough money to fund all the titles. That would be devastating. I know there will be the will and the talent on the agriculture committees to write a new farm bill (in 2013) but will there be enough money to cover it?”

Extension scenario

Even so, Goule concedes that if a fiscal cliff bill doesn’t come together several days after Christmas, “we’ll probably be looking at a one-year extension.”

If Congress fails to act prior to year’s end and 1949 law is enacted, “the immediate change in the dairy policy won’t be felt by the consumer on Day One,” says Goule. “It’ll have to work its way through the production system.

“If the House can pass fiscal cliff legislation — and that’s a big ‘if’ — there will be something in there to extend the (2008) farm bill for a year. That will include a dairy element.”

Asked for a prediction on how the next Congress will legislate, Clark says the next three to six months will tell the tale.

“Almost anyone with common sense could quickly come up with a deal that would get 218 votes in the House,” says Clark. “The problem Boehner is confronted with is his caucus doesn’t want him to put a bill on the floor unless a majority of the Republicans support it.

“Obama could cut a fiscal cliff deal with (Senate Minority Leader, Kentucky Sen. Mitch) McConnell and it gets through the Senate. It could be a deal in the middle that would pass the House — say, 120 Republicans and 100 Democrats or vice-versa — and could open a window to get more centrist legislation through the House. If that happens, the farm bill could come to the House floor and it could get done.”

However, Clark speculates that scenario might spike Boehner’s chances for re-election as House Speaker in early January. “If Boehner schedules a vote on such a centrist bill right after Christmas, the House passes it and the fiscal cliff is averted, will he be re-elected or thrown out?”

Meanwhile, the uncertainty over farm law and constant back-and-forth between lawmakers and the White House has led to nervous farmers and rural bankers going into the 2013 cropping season.

“We’re looking at a situation like 2009/2010 when we were in a major credit shortage,” says Goule. “If the next farm bill is written in 2013 and crop insurance has to be cut significantly and the lowering of the safety net value, it’s a guarantee that lenders will pull in some of their credit.

“Those are our risk management tools. If those are cut back then lenders will cut back on how much credit they’ll provide.

“The discussions on that have already started and we’re hearing from producers worried about operating loans for next spring.”

Goule says producers need to call the Republican leadership immediately after Christmas and insist on a five-year farm bill. “If that doesn’t happen, expect crop insurance to be cut, conservation programs to be cut, rural development will be cut, renewable energy will be cut, the farm safety net will be cut and nutrition will be cut.”

“Thank God agriculture is doing relatively well, right now,” says Clark. “If commodity prices were in the toilet, this situation would be really awful. That may be one reason Congress’ sense of urgency to get the farm bill done isn’t what it might be.”